Sunday, June 23, 2024

New Zealand Superannuation: Generational Wellbeing

By Alec Waugh

Well-respected New Zealand economist Len Bayliss (1927-1918) said in 1996, ”Doomsday rhetoric characterises NZ media handling of retirement income policy”. Twenty-five years later his comment still retains validity.

Some of the language about NZ Superannuation over the last two decades has moderated, and there is now a growing awareness that our superannuation scheme is excellent public policy, supported by the sound KiwiSaver scheme.

The recent Q+A with Jack Tame, New Zealand Superannuation discussion (29 August, 2022), was an example of how commentator knowledge has improved over the last two decades.

Knee-jerk reactions do continue, pop up commentators with dubious credentials are everywhere. Talk-back radio is one example; social media platforms another. Fascinated by their own one-line rhetoric, and often conservative political orientations, some talk-back hosts run the risk of becoming on-air trolls. There is no issue here with voicing opinions, just a request to be more transparent about your leanings.

The media continues to do a poor job in the transparency stakes about the faces and voices engaged in communications, and the bias they bring to the microphone.

Long-term projections often appear in the Retirement income discussions. Time-frames around 2050-2080 projections are useless and can be disregarded. Why? History shows such assumptions are so wide of the mark they lack value, and the projections cannot factor in society changes over time.

Those who are prepared to research NZ Retirement income policy should start with Roger Hurnard, with his 2011 paper “Mixed messages: the future direction of NZ retirement income policy”1. Then read the 2019 Retirement Commissioners Review paper to government2. Add in Michael Littlewood’s various superannuation papers published throughout the two decades 2000-2020. 3

Commentary by Martin Hawes, Mary Holm, Rob Stock and analysis work by Susan St John and Dr Claire Dale further add substance to readers’ knowledge.

The myth “burden of the ageing population” continues to be aired, rarely understanding the fact that superannuation policy is far more than a monetary formula.

It is linked to issues of physical security, personal well-being, economic productivity, social health and the distribution of income and wealth.

Be alert and wary to those suggesting means-testing or removing universality, as these are wonderful pub fare one liners, but are poison for the greater public good. Be sceptical of those suggesting the scheme is “throwing younger generation under the bus”.

The dollar cost of NZ super as a proportion of GDP is also exaggerated. Unlike many other countries New Zealand does not pay a tax-free Superannuation pension. That needs to be factored into the numbers. The current after-tax figure is 4.5 percent of GDP, a low figure, and future projections within a reasonable time frame (2030) show around 6 percent, also a sustainable figure.

Many of today’s seniors are economically active, boosting the participation rate and paying tax. We should talk about “multipliers”. More people working means increased output, stimulating the economy, and increasing productivity.

Conversely rampant discrimination and the fact many of the elder generation have many quality-of-life health issues, means the vision of working seniors does not apply. Research strongly suggests that usually it’s only the well-educated who can find regular income after 65 years of age.

Voluntary and unpaid work needs to be factored into all economic costings, with seniors involved in less crime, road accidents etc. Seniors are the backbone of New Zealand family child care arrangements.

Seniors are also assisting with many housing deposits, and early inheritance lump sums, frequently at their own savings disadvantage.

The input of the older generation in providing a place of abode for those who often don’t leave their childhood home is now an everyday living arrangement for some. Many children who had left home are also returning to their original nesting place after the ravages of failed marriages and independent living arrangements

We are talking of a fundamental societal shift over recent years. Seniors are now the backbone of many of the family economic arrangements in New Zealand. New Zealand Superannuation has become a generational transfer entitlement wrapped around family, equity and wellbeing principles.

Waugh is Chairman of Kaspanz, a Consumer Group formed to provide a voice for New Zealand Consumers in receipt of pensions, NZ Super, annuities or similar.

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